Europe is set to experience “weak development” across many of its equity sectors this year, according to forecasts from ING.
In What to expect from European sectors in 2024, the financial services giant indicated the manufacturing, staffing and construction sectors were likely to witness declines, even as transport and retail are set to see a slight recovery. Commercial real estate, it added meanwhile, had seen its most-challenging year in 2023 but there was now some “room for optimism”.
“The fastest central banking tightening cycle in modern history led to a sector switching from expansionary mode to tightening mode, as transaction volumes fell by roughly 60% during the year,” the report’s authors wrote.
“While interest rates have come down from the peak, we expect 2024 to remain quite challenging, as the sector is less well equipped for structurally higher all-in funding costs. We do expect transactions to pick up, as some sellers will feel more pressure to sell assets in order to pay back liabilities coming due.”
Increased tech spending
The industry the firm seemed most hopeful about was information and communication, expecting it to repeat the 4% volume growth it saw last year in 2024. That view was based on several factors, ING said, explaining: “First, investment in automation, cybersecurity, software and artificial intelligence will increase, while investments in hardware will decrease. Moreover, spending on information and communication technology in Europe is likely to increase by around 5% per year. Growth in the telecom sector will be more subdued in the software and services sector.”
It went on: “Lastly, even though excitement is high, generative AI will not yet lead to increased volume growth in 2024. Many enterprise software companies expect to launch their initial versions of software packages that include generative AI in the first half of 2024, but the roll-out of these packages will also take time. 2024 is therefore set to be a transition year.”